Marc Faber says gold prices not expensive

Dr. Doom still bullish on gold bullion

By

ChrisOliver

HONG KONG (MarketWatch) – Gold’s rise to a fresh record Friday won endorsement from financial advisor Marc Faber, who said the rally in bullion prices didn’t appear excessive in view of the inflationary backdrop and ongoing bias of the world’s monetary authorities towards weak currencies.

Faber, known as Dr. Doom for his bearish call on U.S. stocks shortly before the crash of October 1987, said he would continue to be a buyer of bullion at current levels.

“Given all the unfunded liabilities and the money printing in the world and the size of the financial assets in the world, I don’t think we are in a bubble,” Faber told a CLSA Investors’ Forum 2010 in Hong Kong.

Gold
GCZ10
for December delivery rose $4.10, or 0.3%, to $1,277.90 an ounce on the Comex division of the New York Mercantile Exchange Friday, on track for a new record high. In electronic trading ahead of New York trading, it hit $1,284.40 an ounce.

Faber advised investors to build exposure to bullion via monthly purchases and avoid sinking too large a share of their total wealth into the metal, as violent pullbacks can be expected.

“We can have one day a correction of 20 to 30%,” Faber said.

He noted the 1970s bull market in gold saw prices plunge 50%,from $195 to $105 an ounce, before then rising to more than $800 an ounce.

Faber cautioned physical gold holding in the U.S. and Switzerland were subject to the possibility — considered remote by mainstream observers — of forced sales to the government. Precious metals investments held in the Hong Kong or Singapore banks were safer, as these jurisdictions, influenced by China, were likely to resist U.S. political pressure on individual investors, Faber said.

Faber also said he was upbeat on Japanese stocks, reiterating views he expressed in February.

The prolonged bear market that has hammered Japan’s main benchmark to a quarter of its peak level, stood out as a good contrarian bet, he said.

“It’s a country that people have given up on,” Faber said

The catalyst for a rally could from come a weakening yen, which in turn would weaken the attractiveness of the bond market and push investors to equities in the search for dividend yields.

“I think there is an opportunity, because compared to the bond yield Japanese stocks are inexpensive,” Faber said.

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